The Maoist Roots of China’s Extreme Income Inequality

China today has more extreme income inequality, according to some measures, than the United States, the most unequal advanced capitalist society. The conventional view is that when Mao Zedong was in charge, he relentlessly pursued greater social equality, even at the expense of China’s growth rate. However, a closer look at the contours and drivers of current inequalities tells a different story. The cardinal feature of income inequality in China today is a very large, and generally increasing, gap between the household incomes of rural origin citizens and their urban origin counterparts. China’s unusually large urban-rural income gap is rooted in, and perpetuated by, the system of household registration ( hukou ) that was institutionalized under Mao in 1958. By perpetuating the hukou -based division of Chinese into lower caste rural origin citizens and favored urban origin citizens, while relaxing the Mao-era restrictions on rural to urban migration, China in the reform era benefited by exploiting the undercompensated labor of millions of rural migrant laborers, arguably the major engine of the China boom. Despite some modest reforms of the hukou system in recent years, most of the more than 250 million rural–urban migrants in large cities today still face considerable obstacles and discrimination in trying to gain access to urban public goods and benefits for themselves and their children. But today the stubborn persistence of hukou -based discrimination poses major obstacles for China’s future. Three concrete obstacles are discussed: the low human capital levels of China’s adult population, the difficulty of shifting the economy to emphasize consumption over savings, and the declining number of babies being born each year. Each of these obstacles has roots in the hukou system institutionalized under Mao.